Finance

• Finance is the allocation of scarce resources which include money
• Finance in business


  The function or area responsible for managing aspects of operations dealing with financial matters. It is concerned with the allocation of funds and resources of those funds
• 3 Basic questions addressed by the study of finance

  • What types of investment should the firm undertake?
  • What sources of funds should the firm tap in order to fund these investments?
  • How can the firm ensure that its cash flows will suffice to support its day-to-day operations?
• Branches of Finance


  • Public Finance - Deals with the collection of taxes, budget allocation for programs benefiting the general public, and production/distribution of public goods.
  • Personal Finance - Encompasses personal financing, budgeting for short and long-term needs, creating saving plans, investing for contingencies, retirement, and wealth maximization.
  • Corporate Finance - Primarily concerned with managing all financial activities of an enterprise or business organization, aiming to maximize shareholder value through sound financial planning
• Relationship between Accounting and Finance

  Managerial accounting in finance involves preparing reports to aid internal decision-making, relying on historical data provided by financial accounting to emphasize sound decision-making for better future performance
• Financial Management in Business

  Planning, organizing, controlling, and monitoring financial resources to achieve organizational goals and objectives, making decisions to maximize shareholder value which affects the company's market perception
• Problems caused by management of Financial Resources

  • Insufficient capital, inadequate cash to pay suppliers, delays in expansion, possible overstocking of materials, unproductive assets, business failure
• Importance of finance on different areas of operation

  • Research and Development - Assists in budgeting for new products or improvements
  • Employee Relations - Provides data on wages, benefits, learning, and development
  • Marketing Promotion - Determines optimal budget for advertising and promotion
  • Expansion - Supplies historical financial data for decision-making on capital expenditure for expansion
• Expansion


  Decision makers in an organization find it imperative to expand. Finance will have to supply them with historical financial data to see whether or not past performance can help predict the financial outlook if additional capital expenditure is to be made
• Meeting contingencies


  Every business faces external risks such as natural calamities, major political problems, big fluctuations in input prices, and diminished capacity of consumers among others, which are commonly beyond one's control
• Government Agencies


  Finance, in some ways, also serves as the liaison between the organization and government agencies
• Asset Management


  Finance is tasked to include in the master budget plan the disposal, sale, or acquisition of fixed assets such as machinery or the building of a new plant
• Information system


  In order to make sound financial decisions, finance managers rely on information supplied to them by different department heads, including the accounting supervisor
• Shareholders


  The shareholders elect the Board of Directors (BOD). Each share held is equal to one voting right
• Board of Directors (BOD)


  The BOD is the highest policy-making body in a corporation. The board's primary responsibility is to ensure that the corporation is operating to serve the best interest of the stockholders. The ability to elect a director in the board is contingent on the amount of share owned and the number of directors in the board
• President (Chief Executive Officer)

  The roles of a president in a corporation may vary from one company to another. Among the responsibilities of a president are overseeing the operations of a company, ensuring that the strategies as approved by the board are implemented as planned, and performing all areas of management planning, organizing, staffing, directing, and controlling
• VP for Marketing


  Formulating marketing strategies and plans, directing and coordinating company sales, performing market and competitor analysis, conducting or directing research that allows the company to identify new marketing opportunities, and promoting good relationships with customers and distributors
• VP for Production


  Ensuring production meets customer demands, identifying production technology/process that minimizes production costs and makes the company cost competitive, coming up with a competitive production plan that maximizes the utilization of the company's production facilities, and identifying adequate and cheap raw material suppliers